B-157308, OCT. 6, 1965

B-157308, OCT. 6, 1965

TO SELLERS, CONNER AND CUNEO, ATTORNEYS AND COUNSELORS:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 2, 1965, SUBMITTING A CLAIM ON BEHALF OF COOKE ENGINEERING COMPANY, 735 NORTH SAINT ASAPH STREET, ALEXANDRIA, VIRGINIA, FOR THE RETURN OF $39,000 ASSESSED BY THE CONTRACTING OFFICER AS LIQUIDATED DAMAGES UNDER BUREAU OF SHIPS CONTRACT NO. NOBSR-85438 DATED MAY 23, 1961, AND WITHHELD BY THE DEPARTMENT OF THE NAVY ON VOUCHERS PAID DURING APRIL 1963. YOU ASSERT THAT SUCH DEDUCTIONS WERE IMPROPER BECAUSE BOTH PARTIES CONTRIBUTED TO THE DELAY IN COMPLETING THE CONTRACT AND IT IS IMPOSSIBLE TO APPORTION SUCH DELAY. YOUR CONTENTIONS AS TO THE CAUSES OF THE DELAY ARE THAT THE CONTRACTOR WAS REQUIRED TO RESEARCH THE MARKET FOR NEW MATERIALS OR PARTS, AND THAT DELAYS BY THE BUREAU OF SHIPS IN DETERMINING WHETHER OR NOT SUCH NEW ITEMS COULD BE USED IN THE END PRODUCTS, PLUS THE BUREAU'S FAILURE TO TIMELY AMEND DEFECTIVE SPECIFICATION (SHIPS-R 3763) PREVENTED CONTRACT PERFORMANCE WITHIN THE ORIGINAL SCHEDULE, WHICH CALLED FOR DELIVERIES COMMENCING 8 MONTHS AFTER DATE OF THE CONTRACT. IN THIS CONNECTION IT SHOULD BE NOTED THAT, AT THE TIME OF THE SPECIFICATION AMENDMENT, THE CONTRACTING OFFICER AND COOKE ENGINEERING EXECUTED A SUPPLEMENTAL AGREEMENT (MODIFICATION NO. 4, EFFECTIVE OCTOBER 3, 1962, AS CLARIFIED BY MODIFICATION NO. 5) AGREEING TO A NEW DELIVERY SCHEDULE WHICH PROVIDED FOR DELIVERY OF ITEMS 1 THROUGH 4, THE PRINCIPAL ITEMS, DURING THE MONTHS OF NOVEMBER AND DECEMBER 1962.

THE GENERAL PROVISIONS OF THE CONTRACT INCORPORATED STANDARD FORM NO. 32, WHICH WAS AMENDED IN PERTINENT PART TO INCLUDE THE FOLLOWING PROVISIONS AS PRESCRIBED BY PARAGRAPH 7-105.5 OF THE ARMED SERVICES PROCUREMENT REGULATION:

"/2) PARAGRAPH (F) OF THE CLAUSE OF THE GENERAL PROVISIONS ENTITLED "DEFAULT" IS HEREBY REDESIGNATED PARAGRAPH "/G)" AND THE FOLLOWING PROVISIONS MADE PARAGRAPH "/F).'

"/F) IF THE CONTRACTOR FAILS TO DELIVER THE SUPPLIES OR PERFORM THE SERVICES WITHIN THE TIME SPECIFIED IN THIS CONTRACT, OR ANY EXTENSION THEREOF, THE ACTUAL DAMAGE TO THE GOVERNMENT FOR THE DELAY WILL BE DIFFICULT OR IMPOSSIBLE TO DETERMINE. THEREFORE IN LIEU OF ACTUAL DAMAGES THE CONTRACTOR SHALL PAY TO THE GOVERNMENT AS FIXED, AGREED, AND LIQUIDATED DAMAGES FOR EACH CALENDAR DAY OF DELAY THE AMOUNT SET FORTH ELSEWHERE IN THIS CONTRACT. ALTERNATIVELY, THE GOVERNMENT MAY TERMINATE THIS CONTRACT IN WHOLE OR IN PART AS PROVIDED IN PARAGRAPH (A) OF THIS CLAUSE, AND IN THAT EVENT THE CONTRACTOR SHALL BE LIABLE, IN ADDITION TO THE EXCESS COSTS PROVIDED IN PARAGRAPH (B) ABOVE, FOR SUCH LIQUIDATED DAMAGES ACCRUING UNTIL SUCH TIME AS THE GOVERNMENT MAY REASONABLY OBTAIN DELIVERY OR PERFORMANCE OF SIMILAR SUPPLIES OR SERVICES. THE CONTRACTOR SHALL NOT BE CHARGED WITH LIQUIDATED DAMAGES WHEN THE DELAY ARISES OUT OF CAUSE BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR, AS DEFINED IN PARAGRAPH (C) ABOVE, AND IN SUCH EVENT, SUBJECT TO THE "DISPUTES" CLAUSE, THE CONTRACTING OFFICER SHALL ASCERTAIN THE FACTS AND EXTENT OF THE DELAY AND SHALL EXTEND THE TIME FOR PERFORMANCE OF THE CONTRACT WHEN IN HIS JUDGMENT THE FINDINGS OF FACT JUSTIFY AN EXTENSION.'

THE CONTRACT'S LIQUIDATED DAMAGES CLAUSE IS AS FOLLOWS:

"AMOUNT OF LIQUIDATED DAMAGES: FOR EACH DAY OF DELAY IN DELIVERY OF EACH UNIT OF ITEMS 1 THRU 4, 1/2 OF 1 PERCENT OF THE CONTRACT UNIT PRICE OF EACH LATE-DELIVERED UNIT, PROVIDED, HOWEVER, THAT THE AGGREGATE OF LIQUIDATED DAMAGES PAYABLE UNDER THIS CONTRACT SHALL NOT EXCEED 10 PERCENT OF THE TOTAL CONTRACT PRICE OF ITEMS 1 THRU 4.'

THE RECORD INDICATES THAT THE CONTRACT WAS PRIMARILY FOR THE DESIGN AND MANUFACTURE OF A QUANTITY OF VIDEO SWITCHING SYSTEMS FOR USE IN RADIO AIR TRAFFIC CONTROL CENTERS. SUCH EQUIPMENT WAS REQUIRED TO BE IN ACCORDANCE WITH BUREAU OF SHIPS CONTRACT SPECIFICATION SHIPS-R 3763, DATED OCTOBER 4, 1960, WHICH PROVIDED UNDER PARAGRAPH 3.2.2 THAT MATERIALS AND PARTS WHICH REPRESENT AN IMPROVEMENT IN THE STATE OF THE ART OVER MATERIALS AND PARTS COVERED BY APPLICABLE SPECIFICATIONS SHALL BE USED. THAT PARAGRAPH FURTHER STATED THAT APPROVAL OF SUCH MATERIAL AND PARTS WOULD BE IN ACCORDANCE WITH SPECIFICATION MIL-E 16400, WHICH REQUIRED THE SUBMISSION OF LISTS OF NONSTANDARD PARTS WITHIN 90 DAYS AFTER AWARD OF THE CONTRACT AND SET FORTH THE INFORMATION THAT ADMINISTRATIVE ACTION FOR APPROVAL OR DISAPPROVAL OF PARTS WOULD NORMALLY BE TAKEN WITHIN 60 DAYS AFTER RECEIPT OF THE REQUEST BY THE AGENCY CONCERNED.

IN RESPONSE TO CONTENTIONS PRESENTED IN A LETTER OF SEPTEMBER 17, 1963, FROM COOKE ENGINEERING REQUESTING THAT THE DELIVERY SCHEDULE BE EXTENDED SO AS TO CORRESPOND TO THE TIME OF THE ACTUAL DELIVERIES, THE CONTRACTING OFFICER ADVISED THE CONTRACTOR BY LETTER DATED OCTOBER 13, 1964, IN PERTINENT PART AS FOLLOWS:

"7. THE CONTRACTOR DID NOT SUBMIT COMPLETE LISTS OF NON-PREFERRED PARTS WITHIN THE REQUIRED NINETY (90) DAY PERIOD. IN FACT, THE CONTRACTOR'S LAST REQUEST FOR APPROVAL OF NONSTANDARD PARTS WAS DATED 19 JULY 1962, A FULL THIRTEEN AND ONE HALF (13 1/2) MONTHS AFTER CONTRACT AWARD.

"8. ENCLOSURE (4) OF THE REFERENCED LETTER LISTS SEVENTY-SIX (76) SEPARATE REQUESTS FOR APPROVAL OF NONSTANDARD PARTS AND EIGHT (8) RESUBMISSIONS OR A TOTAL OF EIGHTY-FOUR (84) REQUESTS. THE BUREAU RESPONDED TO SIXTY-FOUR (64) OF THE REQUESTS WITHIN SIXTY (60) DAYS. ONLY TWENTY (20) ITEMS, OR TWENTY-FOUR PERCENT (24 PERCENT) OF THE REQUESTS REQUIRED A LONGER TIME TO PROCESS THAN THE NORMAL SIXTY (60) DAY PERIOD CITED IN THE APPLICABLE SPECIFICATION DESPITE THE FACT THAT APPARENTLY NO EFFORT WAS MADE TO SUBMIT LISTS OF PARTS OR TO COMBINE RELATED PARTS UNDER A FEW REQUESTS. THEREFORE, THE BUREAU WILL ASSUME RESPONSIBILITY FOR TWENTY-FOUR PERCENT (24 PERCENT) OF THE ACTUAL EXPERIENCED DELAY.

"9. BECAUSE IT IS IMPOSSIBLE TO PINPOINT THE DEGREE OF PARTICIPATION IN THE OTHER DELAY CAUSING FACTORS SUCH AS DELAY RELATED TO REQUESTS FOR ADDITIONAL GOVERNMENT FURNISHED EQUIPMENT, LATE RECEIPT AND POOR QUALITY OF VENDOR ITEMS, ETC. THE BUREAU WILL ASSUME RESPONSIBILITY FOR AN ADDITIONAL TWENTY-SIX PERCENT (26 PERCENT) OF THE TOTAL EXPERIENCED DELAY THEREBY INCREASING ITS RESPONSIBILITY TO FIFTY PERCENT (50 PERCENT) OF THE TOTAL DELAY IN ORDER TO RESOLVE THIS ISSUE IN AN EQUITABLE MANNER.

"AN APPLICATION OF THE ABOVE WOULD RESULT IN THE FOLLOWING REVISED DELIVERY SCHEDULE:

TABLE

ITEM/S) CONTRACT ACTUAL REVISED

DELIV. SCHED. DELIVERY DELIV. SCHED. ONE EACH ITEMS 1 AND 3 11/30/62 1/31/63 1/1/63 ONE EACH ITEMS 2 AND 4 12/31/62 3/15/63 2/7/63 ONE EACH ITEMS 1 AND 3 12/31/62 3/26/63 2/12/63 ONE EACH ITEMS 1 AND 3 12/31/62 4/2/63 2/16/63

"10. SINCE THE SUBJECT CONTRACT HAS BEEN COMPLETED FOR SOME TIME AND APPARENTLY THE PURPOSE OF THE CONTRACTOR'S REQUEST FOR A REVISED DELIVERY SCHEDULE WAS TO REDUCE THE FINANCIAL IMPACT OF THE LIQUIDATED DAMAGES CLAUSE CONTAINED IN THE CONTRACT, A FORMAL CONTRACT MODIFICATION COVERING THE ABOVE REVISION IS UNNECESSARY. INCLUDING THE SUBSTANTIAL REVISION, DISCUSSED ABOVE THE ACTUAL EQUIPMENT DELIVERY DATES ARE STILL SUFFICIENTLY DELINQUENT TO REQUIRE THE ASSESSMENT OF THE MAXIMUM DAMAGES OF TEN PERCENT (10 PERCENT) OF THE PRICE OF ITEMS 1 THRU 4, OR $39,000.00.'

WHILE NEITHER THE CONTRACTOR'S LETTER OF SEPTEMBER 17, 1963, NOR ITS CLAIM ADDRESSED TO THIS OFFICE, NOR THE CONTRACTING OFFICER'S DECISION OF OCTOBER 13,1964, CONTAINS ANY SPECIFIC STATEMENTS OR FINDINGS AS TO THE TIMES WHEN THE DELAYS IN QUESTION OCCURRED, SO FAR AS THE RECORD SHOWS MOST OF THE DELAY CAUSING FACTORS APPEAR TO HAVE OCCURRED PRIOR TO THE AMENDMENT OF THE DELIVERY SCHEDULE BY THE SUPPLEMENTAL AGREEMENT EFFECTIVE OCTOBER 3, 1962. IT IS THEREFORE TO BE PRESUMED THAT THE EXTENSIONS AGREED TO THEREIN WERE FIXED ON THE BASIS OF ALL THE DELAYS WHICH HAD OCCURRED PRIOR TO THAT DATE. THE ONLY AUTHORITY FOR THE TIME EXTENSION ALLOWED BY THE SUPPLEMENTAL AGREEMENT APPEARS TO BE IN THE PROVISIONS OF PARAGRAPH (F) QUOTED ABOVE. THAT PARAGRAPH SPECIFICALLY PROVIDES IN SUCH MATTERS THAT, SUBJECT TO THE "DISPUTES" CLAUSE, THE CONTRACTING OFFICER SHALL ASCERTAIN THE FACTS AND EXTENT OF THE DELAY AND SHALL EXTEND THE TIME FOR PERFORMANCE OF THE CONTRACT WHEN IN HIS JUDGMENT THE FINDINGS OF FACT JUSTIFY AN EXTENSION. IN THIS INSTANCE THE SUPPLEMENTAL AGREEMENT EVIDENCED NOT ONLY THE CONTRACTING OFFICER'S JUDGMENT BUT THE CONTRACTOR'S AGREEMENT THEREWITH, AND WE FEEL THAT NO FURTHER EXTENSION OF TIME COULD BE ALLOWABLE UNDER THE CONTRACT EXCEPT FOR FURTHER EXCUSABLE DELAYS WHICH OCCURRED AFTER THE DATE OF THE SUPPLEMENTAL AGREEMENT.

INASMUCH AS THERE IS NOTHING BEFORE US TO SHOW THAT ANY OF THE DELAYS ON WHICH THIS CLAIM IS BASED OCCURRED AFTER THE SUPPLEMENTAL AGREEMENT, AND THE CONTRACTING OFFICER HAS MADE NO SPECIFIC FINDINGS WITH RESPECT THERETO, WE MUST CONCLUDE THAT THE RECORD FULLY SUPPORTS THE DEDUCTION OF LIQUIDATED DAMAGES AS ASSESSED BY THE CONTRACTING OFFICER, AND YOUR CLAIM MUST BE DENIED.